If you were paying attention during those last two sentences you will realize that self doubt has begun to take root right next to the bacteria ravaging my plumbing. I expect that in this circumstance the hydrocodone is both my best friend and my worst enemy. I’m taking them two at a time now even though the pain has abated to the point of mild discomfort when I urinate. I convince myself that they help with the fever and they help me sleep, although that last is not really true. They don’t help me sleep at all, but they do help me not to care that I am awake.
Henry was never troubled by self doubt. No feeling of inadequacy, sense of guilt, or pang of conscience ever clouded his mind that I know of. Henry kept his own counsel. By Henry’s reckoning he was the smartest sumbitch in the valley, and while he might pay for good advice that did not mean that he had to take it when it went contrary to his own wisdom. Everyone else’s intelligence was measured by the yardstick of Henry’s own notions, so that the more you agreed with him the more brilliant you became.
Much of what Henry did seemed to me not just counterintuitive, but downright stupid. And yet he was not, despite his behavior, a stupid person. I began to believe over several years that he made stupid business decisions intentionally just to prove that he could. Just like hitting on bizarre and unattainable women—to prove that he could. He had to constantly reinforce the notion he had of himself that he was above having to listen to anyone else or do anything that anyone else would do in the same or similar circumstances. He would cheat and fudge and screw up wherever and whenever he chose, and because by doing so he gave the impression that he was crazy no one ever called him on it. There were almost never permanent consequences for him. Sure he might have to buy a truck or pay a settlement, but his life, his homestead, his business, his circle of influence remained virtually intact. I wondered sometimes if he’d made a pact with the devil.
The lowest I’ve ever seen him was shortly after I’d gone to work for him, about a year after he’d run afoul of the
IRS, and while we were in the process of moving our whole operation to . We got caught out of trust by our floor plan lender. A floor plan is a wholesale line of credit secured by our inventory. As soon as we sold a boat we had to pay it off. Being out of trust meant we hadn’t paid off sold inventory on a timely basis. We weren’t out of trust just a little bit. We were out of trust about $6 million. Arkansas
I had walked into this situation without knowing what I was getting myself into. Henry had been pulling the wool over my eyes as the CPA in charge of his tax work and annual review in the same way he was fooling the lender. When I left the CPA firm to go to work for him, I was suddenly in the thick of the very accounting subterfuge he had been using against me. I knew that sooner or later we were going to get caught. I also knew that as soon as the lender found out we were out of trust they would shut us down and padlock the doors.
Henry had been able to hide his out of trust condition because the lender was at best lackadaisical about checking our inventory. They let us know in advance when they were coming. Henry would get on the phone to his customers, and have them bring their boats back to the dealership on some pretext, usually service work. If that didn’t work he would just tell the lender’s agents that the boats they were looking for were out on a demonstration cruise or at a show. Sooner or later the unit would make its way back to the lot, he’d call the lender, they’d come out to look at it, and everybody would be happy until the next inspection. Then the whole process would start all over again. To keep things interesting Henry kept paying units off and ordering new ones from the manufacturers to keep his float alive.
The internal financial statements he was providing to the lender every month were a joke. The $6 million he was out of trust was being carried as customer deposits. That is he had sold the boats and collected the money, including taking a unit in trade usually, but he hadn’t recorded the sale. The money was be credited to customer deposits rather than recorded as sales revenue. I knew I had to get things honest and I had to do it in a hurry, but I also knew that if I did it all at once the whole sorry mess would come tumbling down on our heads. We were actually making significant progress toward clean books until Henry decided he needed to buy a factory and move his operations to
I ran the numbers on that too. It wasn’t such a bad deal. We bought a bankrupt manufacturing operation for 10 cents on the dollar. The trouble was coming up with the cash to fuel operations until we started getting production off the line. I told Henry it would take $3.2 million to do properly. Henry raised $1.5 million and pulled the trigger on the deal. We were a million seven short, and Henry made up the difference with out of trust floor plan proceeds. Instead of us getting back into trust and being able to breathe a collective sigh of relief, he plunged us deeper into the hole.
It all came crashing down when I published the next set of quarterly financials. I made them honest. I knew I had to. It was one thing to fudge on the monthly internal financials, but I just wasn’t about to lie on the published quarterlies. It would go against everything I stood for. I dug in my heels. Disaster was the result.
When the lender realized that Henry was actually losing money they became unbelievably skittish about the whole arrangement. They descended on us unannounced with twice the usual number of grunts to check our inventory. Naturally they couldn’t find a lot of it. Instead of letting Henry waltz them around with a lot of B.S. like they used to do they started asking really hard questions. When Henry told them a unit was at a show they wanted to get on the phone and talk to someone at the show that could go look at the unit and capture its serial numbers. It got really ugly really fast. Henry was sweating bullets. Tension crackled across the property like downed power lines. After two days of trying to salvage the unsalvageable Henry came clean and threw himself on their mercy. That’s when things began to get really interesting.
The lender didn’t shut us down as I had thought they would. The reason they didn’t shut us down is that they wanted to keep the whole matter as quiet as possible. They had already been caught unawares by another out of trust dealer to the extent of $104 million. That number made our paltry sum seem insignificant. It had also made a big splash in the financial press and caused the lender’s stock price to take a substantial dip. They couldn’t afford any more bad press, and they couldn’t afford any more losses. If they shut us down they would get both. The fiasco would make the papers, and they’d have to liquidate our inventory at a significant discount. They’d be lucky to get out with half what we owed them.
The far better course for the lender was to throw us into a workout. They made Henry sign everything he owned over to them. He was three days just signing papers that gave them first security rights in virtually everything of value we had except the property itself, which was of course mortgaged. Then they parked two agents in our offices to approve every deal we made. All the cash we collected went directly to them every day. We would submit payment requests to them for all our expenses including payroll. Whatever we spent had to be documented and approved by them before they would release the funds. Everything else they kept. They came with us to
. It was burdensome and unnerving. It left us scant room to operate and no way to capitalize on any opportunities that might come our way. The lender ran the business, and they ran it with an iron hand. Still we were open for business, working our way out of the mess, and Henry wasn’t in jail. Arkansas
At first Henry seemed a broken man. He lost his color. He quit combing his hair or taking any care with his appearance. His attempts at philandering were listless and half-hearted. Gradually though he came out of it. It was another instance of Henry escaping his own stupidity unscathed by more or less blind luck. Were it not for the lender’s previous troubles they probably would have locked our doors and filed charges against Henry. As it was, to all outward appearances they left him doing what he’d always done with the one exception that everything was now totally above board and honest. That part probably made Henry crazy, but he made the best of it and within a few weeks seemed his old self. I guess he had to keep his larcenous spirits up by perfecting the use of his ‘foot wedge’ on the golf course. To his credit, and to my everlasting surprise, the one thing he did not do was hold me responsible for the mess. I knew that somewhere in the dark recesses of him mind he had to be thinking that if I hadn’t insisted on being honest he would have been enjoying ‘bidness’ as usual with impunity.
One interesting thing happened to me in the course of all the turmoil. The lender sent an auditor from
to look at our books. I’d already made significant strides getting them into shape, and I went out of my way to be as forthcoming and helpful as possible when he showed up. I guess he appreciated that because we developed a kind of cautious rapport that I would not have thought possible under the circumstances. Maybe the controllers he usually dealt with were still trying to cover up their bookkeeping misdeeds. I didn’t. There wouldn’t have been any point. We were already caught out. Keeping the books honest at that point just made everything work better. The more they knew about the reality of our situation the less likely they were to have unreasonable expectations. All I know is that eventually he came to trust me, and I made sure that his trust was not misplaced. Detroit
Now Henry had earmarked a crummy little internal office in the
facility for my use. The furnishings were awful. The desk and credenza were pressed wood by-products covered in cracked and stained Formica. My chair listed about 5 degrees to port. There were no windows. It shared an air conditioning and heating zone with the windowed offices across the hall that also housed the thermostat. The result was that my office was a good ten degrees cooler than the rest of the building in the winter and that much warmer in the summer. I hated it and so did the lender’s auditor. Arkansas
One day the auditor went to Henry and told him he needed to give me a bigger office. He told him that he wouldn’t even have a business were it not for me, and he had no business consigning me to a slum tenement of an office when there was so much prime space available right across the hall. He told him I needed more space, more comfort, and more respect, and that he wasn’t going to be happy until I was moved into quarters commensurate with my importance to the company. That little speech got me moved into Henry’s office. Henry moved down the hall and built himself another, but I inherited all his office real estate and all his furniture. I’ve never had as fine a place to work since.
The thing was huge. It was the equivalent of three regular sized offices. The entire West wall was floor to ceiling window. The South wall was one huge custom built floor to ceiling cabinet that housed an entertainment center, a clothes closet, file drawers, and a wet bar. The custom made desk was just shy of two acres. There was a matching credenza, and respectable artwork on the walls. The carpet was plush with a hand inlaid design. There was a sofa, two barrel chairs, two end tables, a round conference table and 6 matching custom upholstered directors’ chairs. My new chair was a high backed leather executive chair with padded arms. It did not list to port or starboard. It was so comfortable that I had to eventually get rid of it and replace it with something more conducive to work. I had the Taj Mahal of Middle American office space, and I enjoyed it every day for 7 years before some dirt bag from the company we finally sold out to took it away from me. But that’s a whole other story.
Eventually we slipped the lender’s shackles. They stayed with us for two years, collecting every dime and scrutinizing every payment. It got to be a huge pain in the ass, and it really stymied all our efforts to succeed and grow the company. The lender hardly cared what happened to us. They only wanted to get their money back, plus interest if possible. In fact they probably hoped that we would eventually fail. I’m sure they thought we had it coming to us. They just didn’t want it to happen until we had got them paid off. We were still a long way away from having done that when we found a private lender who was willing to buy out their position. Of course the new lender wanted a substantial discount, and we wanted to make sure that he got it.
This was my first indoctrination into the world of hard-nosed negotiation. I thought we could probably talk the lender into taking 75 cents on the dollar. I thought that was reasonable, and that they would be happy to get it if they could get out quickly and with cash. The longer they stayed in the workout the more likely it was that we were going to fail anyway. They kept such tight reins on us that we weren’t able to invest in improving our production efficiencies or upgrading our product offerings. We were languishing in mediocrity, and our lackluster sales were telling a story of significant risk for the lender. They would be happy to get any reasonable deal.
I figured we could offer them 66 cents and settle out at 75. Henry and his VP thought we could do way better than that. We offered them 40. I was sure they would balk, but they didn’t. They hollered. They made a lot of noise, but they kept talking. In the end we convinced them that we were going to walk away and let them have the keys. In fact Henry jumped up at one of our meetings with them and threw his keys on the table. It was his car keys, but the gesture wasn’t lost on the lender’s executives who suddenly saw their careers flash before their eyes. They couldn’t afford to take the kind of hit that our abandonment of the enterprise would give them. They were still in too deep, and the memories of their other losses too fresh. Besides, Henry’s demonstrably lunatic behavior over the two years they had been camped out in our back pockets convinced them he was just crazy enough to stick them with the whole mess. They settled for half what we owed them and ran for the exits.
We had a new lease on our future with a new and entirely more accommodating lender. The new lender was an individual. He’d built a huge agricultural operation in the East and sold out to a corporate food processor for a mountain of cash and stock. He was sitting on $150 million, and he was bored. He liked us. He owned one of our boats. He thought we deserved a chance at success. He was just as crazy as Henry but a lot nicer and there was not a larcenous bone in his body. At first he was reluctant to get involved. The risk was considerable. We’d gotten enough of a discount on the deal that his security interest in our inventory was going to be very attractive, but he was still fronting a lot of cash and anything could go wrong. The economy wasn’t that good. Sales were lagging. The VP and I went to his house, stayed with him two whole days talking into the night. We gave him our personal word that we would keep open channels of communication with him and watch his back at every turn. Finally he bought the deal, and we closed out the other lender. He was our savior, and I vowed that I would never let Henry take advantage of him. I never did either—no matter how hard the bastard tried.